The markup formula
Markup is added to the cost to set the selling price. The price, profit and resulting margin are:
selling price = cost × ( 1 + markup% ÷ 100 )
profit = selling price − cost
margin% = profit ÷ selling price × 100
Worked example
A product that costs $100 with a 40% markup:
Selling price: 100 × 1.40 = $140.
Profit: 140 − 100 = $40.
Margin: 40 ÷ 140 × 100 ≈ 28.6%.
Markup-to-margin conversion
Because markup is measured against cost and margin against price, the two never match. A given markup always produces a smaller margin:
| Markup | Resulting margin |
|---|---|
| 20% | 16.7% |
| 40% | 28.6% |
| 50% | 33.3% |
| 100% | 50% |
Tip: retailers often think in markup ("keystone" pricing doubles the cost, a 100% markup), but profitability is best judged by margin. To work backwards from a target margin, use the Profit Margin Calculator.